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The Impact of Informal Lending Mechanisms on Rural Agricultural Development: Evidence from South Sudan

Year: 2026

Type: article

Abstract: This study investigates the influence of informal lending mechanisms — specifically Community Group Saving and Lending (CGSL) mechanisms — on rural agricultural development in Eastern Equatoria, Jonglei, and Lakes States of South Sudan. Adopting a pragmatic, mixed-methods cross-sectional design, quantitative data were collected via structured questionnaires (n=81) and qualitative data through semi-structured interviews (n=17), analysed through the integrated lenses of Financial Inclusion Theory, Institutional Theory, Social Capital Theory, and Behavioural Finance Theory. Chi-square analysis confirmed a statistically significant positive association between CGSL participation and agricultural productivity (χ² = 15.92, df = 4, p = 0.0001). Binary logistic regression further established that access to credit through CGSLs is a significant predictor of technology investment decisions (β = 1.9459, SE = 0.875, p = 0.026). Critically, 95% of respondents agreed that access to rural financial services has the potential to make a transformative difference in agricultural output, while 100% agreed that scarcity of working capital is the primary constraint on investment. The study finds that CGSLs function as adaptive institutional responses to systemic formal-sector exclusion, leveraging social collateral and harvest-cycle repayment flexibility to bridge the financial gap. A novel conceptual framework — the Synergistic Lending-Productivity Model (SLPM) — is introduced, conceptualising the tripartite pathways through which informal lending simultaneously generates financial, human, and social capital outcomes. The study concludes with targeted policy recommendations centred on wholesale lending to CGSL groups rather than displacing them, harvest-linked loan product design, and inte

Source: Zenodo (CERN European Organization for Nuclear Research)

DOI: 10.5281/zenodo.19110621

Authors: Toch, Makoi Majok, Riak, Gabriel Alier

Institution: University of Juba

Language: English

Topic: Microfinance and Financial Inclusion

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty, Zero hunger, Industry, innovation and infrastructure

Open Access status: green

OpenAlex ID: W7140135992

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